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Refi Outlook Jumps

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The latest economic forecast has this year’s refinance originations $34 billion more than was predicted last month. Next year’s outlook for refinances was increased by nearly $90 billion, while the purchase projection was cut.

Overall U.S. mortgage production, which finished the first quarter at $500 billion, is expected to climb to $530 billion this quarter then fall back to $420 billion by the third quarter.

Last month’s forecast was for home loan originations to rise from $480 billion to $500 billion in the second quarter then drop to $410 billion.

The data was included in Freddie Mac’s April 2013 Economic and Housing Market Outlook.

Second-quarter refinance share is forecasted at 70 percent, and the third-quarter share is expected to be 65 percent.

Based on refinance share, refinance production is expected to fall from $385 billion in the first quarter to $371 billion this quarter and $273 billion in the third quarter. Last month’s forecast was for refinances to fall from $370 billion to $350 billion then fall further to $267 billion in the third quarter.

Purchase production is projected to rise from $115 billion in the first quarter to $159 billion then ease to $147 billion. The purchase forecast was lifted from $110 billion for the first quarter, $150 billion for the second quarter and $144 billion for the third quarter.

The share of loans expected to be insured by the Federal Housing Administration was raised to 19.0 percent from 17.3 percent, while the second-quarter FHA share was cut to 18.9 percent from 19.0 percent, and the third-quarter share dropped to 19.1 percent from 22.4 percent.

Adjustable-rate mortgages accounted for an estimated 10 percent of first-quarter business. The share is expected to increase 1 percentage point each quarter through the second quarter of next year.

Freddie expects full-year 2013 mortgage production to reach $1.800 trillion, raising its outlook from $1.750 trillion last month. Next year’s forecast increased to $1.300 trillion from $1.250 trillion.

The refinance portion of 2013 activity is expected to be $1.224 trillion, up from last month’s prediction of $1.190 trillion. Next year’s refinance outlook was expanded to $0.650 trillion from $0.563 trillion.

Refinance share is predicted to be 68 percent this year and 50 percent in 2014.

The purchase financing outlook was boosted to $0.576 trillion for 2013 from last month’s forecast of $0.560 trillion. Next year’s purchase outlook, however, was cut to $0.650 trillion from $0.688 trillion.

Annual FHA production is projected to fall from $0.340 trillion to $0.250 trillion next year. FHA share is expected to climb from 18.9 percent to 19.2 percent.

ARM share is predicted to increase from 12 percent in 2013 to 15 percent next year.

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